Prevailing wage
Prevailing wage is the minimum hourly rate and fringe benefits a government agency sets for each job classification on covered public contracts.
- LAW
- 40 U.S.C. §3142, the Davis-Bacon Act
- RATE
- Basic hourly rate plus fringe, per classification and area
- COVERAGE
- Davis-Bacon contracts over $2,000
- WATCH FOR
- Split-rate weeks without hours recorded per classification
Prevailing wage by state
Which states have their own prevailing wage law, the contract threshold, the agency and how often certified payroll is filed, with sources:
The rate comes from a wage determination, based on what is already paid for similar work in the area. You pay at least that rate for every hour worked in each classification. The Davis-Bacon Act requires it on federal construction contracts, and the Service Contract Act on federal service contracts. Many states set their own prevailing wage laws for state-funded public works.
Which laws set a prevailing wage?
| LAW | COVERS | CONTRACTS |
|---|---|---|
| Davis-Bacon and Related Acts | Federally funded or assisted construction, alteration, or repair of public buildings or public works | Over $2,000 |
| Service Contract Act | Federal contracts whose principal purpose is services through service employees | Over $2,500 |
| State prevailing wage laws | State-funded public works | Set by each state |
How is the rate built?
The determination lists a basic hourly rate and a fringe amount for each classification, such as electrician or laborer, in an area. Classify each employee correctly against it. When one employee’s tasks span classifications, you may pay each classification’s rate, if your records show the hours in each. The two ways to pay fringe, cash or a bona fide plan, are not interchangeable without meeting specific requirements.
| PART | WHAT IT COVERS | HOW YOU CAN PAY IT |
|---|---|---|
| Basic hourly rate | The cash wage for the classification | Cash, unconditionally and at least once a week |
| Fringe benefits | Health, pensions, insurance, vacation and holiday pay, apprenticeship costs | Bona fide plan contributions, cash, or both |
| Total | The full prevailing wage | Must meet the determination for each hour |
Work it out: one week
Enter the wage determination’s basic rate and fringe, what you pay in cash and into a bona fide plan, and the week’s hours. The card pays any fringe shortfall in cash and computes overtime on the basic rate, leaving the fringe out.
One workweek: a plan that covers part of the fringe, and 5 overtime hours
Federal Davis-Bacon pay for one employee in one classification for one workweek: the wage determination’s basic hourly rate and fringe, met in cash, bona fide plan contributions per hour, or both, with any shortfall paid in cash, and overtime at 1.5 times the basic rate for hours over 40 where the Contract Work Hours and Safety Standards Act applies, with fringe at straight time. It leaves out the Service Contract Act and state prevailing wage laws, apprentices, work in more than one classification, plan contributions credited over all hours worked, and certified payroll. Other cases and state law can change the result.
Do you also need certified payroll?
Public works contracts that require prevailing wage almost always require certified payrollCertified payroll. Certified payroll is the weekly payroll report you submit on a federal public works project to prove you paid each employee the required prevailing wage.Click to open the term as well. The report shows the agency that each employee got at least the correct rate and fringe for that week’s hours and classification. Time tracking needs enough detail to support it: hours by project, classification, and often shift, not one weekly total. Requirements vary by funding source, contract, and state. Confirm them with the contracting agency before the first payroll run on the job.
How are apprentices paid, and what is the apprentice ratio?
An apprentice on Davis-Bacon work may be paid less than the determination’s rate only when individually registered in a program registered with the Office of Apprenticeship or a state agency it recognizes, or in the first 90 days of certified probation. The ratio caps apprentices to journeyworkers on the job site in each craft at the program’s ratio. Outside the program’s locality, the project locality’s ratios and rates apply, if it has them. Fringe follows the program, or the full determination fringe if it sets none. State laws can differ.
| APPRENTICE | WHAT YOU PAY |
|---|---|
| Registered, within the ratio | The program’s rate, a percentage of the journeyworker’s hourly rate |
| Certified for probationary employment | May be less than the determination’s rate, first 90 days only |
| Not registered | The determination’s rate for the classification of work actually performed |
| Above the ratio | The determination’s rate for the work actually performed |
Frequently asked
- 40 U.S. Code § 3142 - Rate of wages for laborers and mechanics
- 41 U.S. Code § 6702 - Contracts to which this chapter applies
- 29 CFR Part 5 Subpart B, Interpretation of the Fringe Benefits Provisions of the Davis-Bacon Act
- U.S. Department of Labor, Davis-Bacon and Related Acts
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.